be 24 and five percent -- 20.5% you and a of gdp. you it will equal 22.5% of gdp and it will equal 22.5% of gdp and you and you by 2024. and in him and him and what is him the economic impact of spending that outpaces revenue? does this demonstrate we have a and spending problem that is fiscally unsustainable? a >> we think the budget is on an unsustainable path. an when spending outpaces revenues, that extra deficit in you and you and you will lead to an accumulation of federal and debt. that crowds out some private capital investment. he him and him and him and him and him the rising debt reduces

the flexibility to respond and raises the risk of a fiscal crisis down the road. >> the previous baseline budget projection of may 2013, you have raised the estimate between 2014 by $1 trillion. most of the increase result from lower economic growth and lower tax revenue. can you describe what economic factors have led to the lower economic growth projections? can you describe what the impact for the federal debt will have on economic growth? and him and >> high amount of debt that we project will and will diminish economic growth by the end of the decade and growth by the end of the decade i and reducing our ability to produce. you the downward revision stems are from a large collection of

factors, one of which was a dominant. i will and you we looked at revised data and the comprehensive revisions last year. in a we reassessed how close we thought it would get to are thought it would get to potential output by the second half of the decade. and you are we built the in shortfall into our projection. we took a new look at the effects of the affordable care and act on the labor force. you are in a the collection of those factors brings down our estimate real gdp by 2% by the end of the 10 years. you a you and a that is a dominant factor in our upward revision to projected and deficits. >> thank you. >> thank you, chairman.

welcome. and you we are having an ongoing and you discussion in the senate and you about extending unemployment insurance. and in rhoden in and island i just sat next to in and in and a lady who meets and the profile that we are talking about. she has worked all her life and she was not able to retire and in she lost her job and she is and she lost her job and she is in her 50's and it is hard for in a and in her to find employment through no fault of a her own. she is constantly looking for work. we have a nine percent unemployment rate in rhode in unemployment rate in rhode island. you so, we are also hearing that

if you extend unemployment and insurance, that will have an in and unhelpful effect on the in unhelpful effect on the unemployment numbers because in these are lazy people who are in out there goofing off and if they got a solid -- they we get you a back to work. you and urinalysis shows the is in urinalysis shows the contrary -- your analysis shows and the contrary. a and you >> our analysis suggests if the you benefits were extended through this year, that would and you raise real gdp by .2% at are ready to the end of the year. and >> put the other way,

and the republicans insistence on blocking even a paid for unemployment insurance extension and unemployment insurance extension is costing this country a .2% in gdp growth. and >> i can only repeat our analysis. you >> those are the effects you and quantified. in >> with repeat some of them in the report we released last week. >> i urge my colleagues that we as are one vote away from adding you are one vote away from adding .2% to gdp by doing the right thing for people who are out of work through no fault of

their own. and it is a said commentary that we cannot get that done. is my time is running out. i hear my colleagues on the other side talk about the deficit and say how this is a problem that needs to be fixed. the enthusiasm and the passion and and the militancy with which you our colleagues on the other side to sue the debt is commendable. you that passion and that is determination is that the rate --if cap or a as soon as you talk about benefits that go out to wealthy folks and to corporations through the tax code. we are more than happy to work

to reduce our deficit. but it is impossible for me to look at adding to the cuts that a we have applied to middle and income families and to investment like scientific and exploration and infrastructure in and innovation and at the and him and him same time be protecting the right of a hedge fund billionaire to pay a lower tax rate than a brick mason in rhode island. and my test of when our colleagues are going to be in serious about the debt and deficit is one it is no longer and less important than protecting interest for hedge fund billionaires. as long as the primary thing is to protect that benefit and a

you horde of others that go to and in corporate people, you cannot put them side-by-side and and you say we are all that and serious about the debt and you the deficit. put it in relation to protecting hedge fund billionaires puts the context -- thank you. and in >> senator toomey. >> thank you. let me say, thank you for being here, dr. elmendorf. and i want to complement you and your team my staff and i have turned to your office on numerous occasions for help, whether it is changes to the and in a flood insurance program he or granting the

administration some flexibility and administration some flexibility through a difficult sequester. your staff has been responsive and and helping us to understand the budgetary implications and that is very helpful. you have a great team and i want to thank you. >> thank you. >> i am shocked, have been since last week, not by your analysis that suggests if you increased incentive to leave the workforce, some people will leave the workforce. that is not shocking. what is shocking is my colleagues suggesting this is a great thing to diminish the incentives to work. i don't know how we got to the place where work has become a terrible thing that we must unshackle people from the misery of having to be productive and from supporting their family.

i don't know how it is lost that work is a source of dignity. it has always been the source of advancement in our society. i am not asking you to comment on that. i do want to be clear. your analysis about the results from the incentives of obamacare, that we will have a smaller workforce as a result. a small workforce means a smaller economy. your analysis is we have less total output and that means less opportunity and less prosperity. one thing that is disturbing about your projections is how meager the economic growth

forecast is. for most recent decades, the last 60 years or so, including the great recession, average real gdp growth has been 3%. you are projecting it gradually declines every single year until we get to about 2%, which is well below our historical average. fewer people working and fewer people advancing and a lower standard of living. isn't that what it means? >> the potential output. we think there will be some potential recovery. but then it will be much lower in the future.

a the demographic change, the retirement of the baby boomers. >> you knew the demographics of the aging population last year. that has not changed. you have reduced your forecast for the actual size -- you reduced it so much. it is $1 trillion in 2024. that is a hard number to wrap your brain around. that is the total economic output of four states combined. that is how much you have diminish your forecast. i could you share the main reasons you think our economy will be so much smaller now? >> a large collection of factors. the data were revised last in him and summer and that

affected how much productivity and going forward. new data that change our view of thomas d labor force had grown in the past. we also did a reevaluation of the effect of the affordable care act. you this collection of things, a that turned off the revision were largely in one direction. and a recognizing tremendous uncertainty. and >> the decline in the total you work force participation rate. and >> the most significant a factor relative to the past is slower growth of labor force. and the big increase in in women's participation in the labor force won't be repeated. >> you knew that last year.

my time is out. i appreciate your answers. since the great recession, we have had an experiment with unprecedented governmental policies, massive expansion in regulatory burdens imposed on the economy. massive surge in spending is projected to grow again. completely unprecedented monetary policy. i would suggest the dated is indicating this isn't working so well and the forecast is it for to get worse. >> senator kaine. >> just quickly, there is a lot of food for thought in the a of food for thought in the comments, does the aca a disincentive eyes work? you are the government has been

a disincentivising for some time. we stood tax investment income at a rate higher than salary and and a wages. and then they reached a you then they reached a rough equivalent and now we are taxing i equivalent and now we are taxing work have here. we need to tackle the tax awe need to tackle the tax expenditure issue. i want to make sure i understand your report. you and as i read the report, on revenue as a percentage of gdp, the 10 year average you project is about 18.1%. in that is the average. the 40 year average is 17.5%. him you are in so the next 10

years are projected to be somewhat higher. and the average of revenue to you gdp is between 90% and 20% -- 19% and 20%. and if instead of an 18 per one percent revenue to a gdp we had a 19 per five percent -- 19.5% revenue to gdp, what would that do to the deficit projections over the next 10 years and to the projections of annual interest in payments over the next 10 years? and to i know that involve some a assumptions. i would like to know in a mathematically. you i believe we have not just a spending problem but a revenue and problem. if we have revenue of 19.5% of gdp, what would that do to deficit projections?

in a is an him >> we will provide you that answer. >> on spending, you project that spending will go from 20.8% percent to 22.4%. a the components are also interesting. social security to 5.6%. major health programs to 6.1%. other programs dropping to 2.2%. discretionary really dropping. interest payments going up to 3.3%. i would like to ask you to calculate where tax expenditures fit in this component. you don't have tax expenditures. you consider that more on the revenue side? based on the work we have done on this committee, the tax

expenditures are larger than any line item. a and they are every -- in a unlike the budget that we and battle every year, so often these tax expenditures get put into the codes and we let them go forever. what is the projection of tax expenditures as a percentage of gdp and how that would change over the 10 year period. an and him you build some of and him that into your revenue projections anyway. i would like to see the and magnitude as a percentage of gdp as a follow-up question for the record. him and him >> is we know the 12 largest tax expenditures would average,

and total about 6.5% of gdp over the coming decade. and the coming decade. >> the 12 largest are 6.5% of in a gdp. and gdp. in you are talking about nine .5% of gdp -- 9% to 9.5%. him and him >> tax expenditures and him and him have the same and him and types of effects on him and the budget and on the him and him economy as many him types of federal spending and him and should be viewed -- >> they can also warp market and him behavior. and him and him i would love that answer. a and the 12 largest, the actual total is closer to 9.5%. him total is closer to 9.5%. and in him that is larger than social security and medicare and other health programs and almost

double what the discretionary budget would be over the next year. you thank you, madam chair. and him and >> thank you, madam him and him chair. and him and there are a number of things i agree with you. him and you said we want to drive for opportunity. him and him and him and him and him i agree we need to address our long-term fiscal and address our long-term fiscal challenge. i disagree with the way you typify in terms of a debt ceiling. and it is about trying to in in steel increasing the debt him and him burden on our children and grandchildren. i think most americans would expect us to enact some fiscal discipline. and him and him and him let me and start out there.

if we stopped deficit spending him and him and him today, other than some short-term cash flow and him problems, there will be and him and him no reason to and him increase the debt and him ceiling, correct? him >> and him and unified budget deficit does not capture all of the courses subject to limit. >> there could be some cash flow issues. i got that. and in general, the reason we have to increase the debt you ceiling is because we are in you continue to deficit and spend, correct? and >> that is right, senator. you and >> i have a chart you and appear. the first step is to meet you have a problem. when i hear people say social him and him security is solvent, and i challenge that assumption. in him the next that is you have and the next that is you have to

him define it. we have a 30 year demographic and him problem. and him and him will we have done with your cbo estimates, most of what you do -- in and in a talking to my and constituents, that doesn't in do it for them in terms of understanding the problem. a i want to make sure we are you i want to make sure we are in getting this right. and in a off of the latest and rejections, we put numbers to them. in this is what we put up with. a spending of $8 trillion. him and $88 trillion in the and third decade, 127 trillion and dollars. i want to focus on social security. and him i was going through the and him reality of the fact that social security trust fund holds you $2.7 trillion of government

bonds. and in him and a and the in treasury has the offsetting liability. is liability. your projections of deficit spending in the social security in a trust fund, the amount of and benefits to pay out is about in benefits to pay out is about $15 trillion. and him and >> we have not done the calculations in dollar terms but it would be a large number. >> you're being cooperative in and providing this calculations. and i would like cbo to start converting these percentages to gdp. and im and him and him think you could convert all the and think you could convert all the rest of your scenarios and that would be helpful. in that would be helpful. a him >> we focus on shares of gdp. and we think that nominal dollars have less and less meaning as you go further out.

it would be more than $200 him and him and him trillion in and him aggregate. we find these numbers without the context of the size of the a economy has the potential -- and him and him and >> but it is all relative. him and in 30 years, the size of the economy would be $64.8 him trillion. and trillion. him and him we are coming up and him and him with the deficit over that time would be $127 and him trillion. and him our debt at that point would be about $120 trillion him and divided a by 64.8 and would be -- him him those are scary numbers. to put that number into context, himto put that number into context, all assets is about $96 him trillion.

him him in the next 30 years -- a him and the baby boom generation retiring. and generation retiring. him and all these benefits we him promised. and in long-term fiscal challenge that madam chair talked about us addressing. and and we have to admit we have the problem and put it in the terms that the american people understand. and the percentage of gdp is not him and a way to present this. him and if we start talking in these terms about the danger facing this nation, we just a might have an opportunity to get everything on the table and start working toward real him solutions. and thank you. him >> senator

baldwin. >> thank you, madam chairwoman and ranking members. thank you, dr. elmendorf, for being here. in i would like to visit a with perhaps a wisconsin -- and starting with the report on him and him the impact of the and him affordable care act on and him the people choosing to him leave the workforce. this brings me to a bunch of very hard-working people who i have been proud to represent in the house and the senate for many years. him him family dairy farms. him him him him for so many years, one of the family has had a to leave the farm to work to bring in health insurance.

and whether it is because of the pre-aca rules wearer insurance companies could deny coverage for people with pre-existing health conditions are simply the risks associated with covering a and risks associated with covering a small organization in him a risky business. and that story has repeated itself. i have met so many folks in that situation. they may now that they can get family health coverage in the marketplace choose to leave those jobs and that that will be counted in one way but i can and sure you when they return full-time to the farm they will be working both investing their

efforts in labor and raising their family and caring for senior relatives and engaged in the economic activity of the farm. i appreciated your blog entry to bring greater clarity to what and sort of movement this is. and when somebody is laid off, a we mourn and are upset. when somebody chooses to leave in this manner, whether it is retiring or doing what they want to be doing, work and family enterprise, that is more reason for celebration. in the report on the slow recovery of the labor market, some of the recent numbers on the number of job seekers per job opening that exist reached a

huge peak in 2009 6.7 job seekers per open job and dropped to what is now 2.7, 2.9 in the and fall of last year. i know is not a part of your a himi know is not a part of your affordable care analysis to talk about what happens when you people do leave the job and market, or leave jobs because they can secure health insurance. is it logical to assume there will be 2.7 people today looking to seize that opportunity if that displacement dislocation occurs? and >> the fx of changes in the you >> the fx of changes in the supply of labor are very different under the economic conditions facing the country and today. there is a large excess of

people looking for jobs who cannot find them. when we think the job market will tighten considerably. you under current economic conditions, it is the demand for labor that is limiting employment. and changes in the number of workers does not have the you effect. by later in the decade, when the and job market will have an tightened, we think change is and him in labor supply will transfer and we think this number will come back down to the more standard level we have in the labor force given the normal turnover. >> i want to associate myself with some of the previous comments on our ongoing debate on extending emergency unemployment benefits. when you were last before the committee, we engaged in a

conversation based on the federal reserve paper on long-term unemployed and how they have become less attached to the workforce and is lost skills they once held and present other challenges. when this emergency unemployment compensation lapsed, the statistics in wisconsin are about 22,700 wisconsinites lost benefits. is supposed to continue throughout the year to late summer close to 99,000. the stories are heartbreaking. foreclosure. i hear from folks on the number of jobs they have applied for, the budget they have tried to live on with unemployment assistance and what that will

mean to not have it. i guess i would ask, is it correct to state that extending unemployment insurance is one of the most cost-effective ways to stimulate a weak economy? >> that is right, senator. to add jobs in the short run, expansion of unemployment insurance was the most cost-effective item on that list. >> thank you. >> senator ayotte. >> i want to thank the chair and ranking members and dr. elmendorf. yesterday the administration announced another delay in the intimidation of the affordable care act.

companies were given another year to comply with the law. businesses with 100 employees can phase in their compliance with the law. is this something you have looked at? do you think it will have a difference? he basically put off some of the conclusions based on the original date of the employer mandate in 2015 in terms of what the impact will be on part-time employment. where do we stand with all of these changes made by executive order to this law in terms of cbo's analysis? >> the analysis we released last week are based on our view of how the affordable care act

would unfold as of early december. these analyses are very complicated and would need to stockade and focus on the analysis to get these reports done. we are already at work on our next big projections. every year we do projections in the spring. we are already working to update our projections for the affordable care act and other aspects of the budget. yesterday's announcement was a surprise to us and you. these things are complicated. are and springtime -- we have reached no projections yet. all of what we have learned in the programs and so on. we have labeled these updates as partial and preliminary.

>> at the rate the administration is changing this law unilaterally, i think your people will be working overtime. it seems like it is a moving target. i think this could be a real challenge for you. >> people who work in health care are working overtime. >> i wanted to ask the issue that senator toomey ask you, the reduction in the labor participation rate that you predicted as a result of the affordable care act. are you concerned when you look at this reduction in the labor force in terms of the impact of necessities that will cause some people to leave the workforce or work less hours? did i understand that correctly? who will that have a more disproportionate effect on,

lower or higher wage workers? >> by lower wage workers because they are the people facing the largest change under the affordable care act. >> are you worried the incentives could have discouragement on upward mobility? if there is a relationship between the amount of subsidy that you receive and whether or not you continue working or seek higher employment, could that become a discouragement for upward mobility? to i take that promotion or don't i? we want to encourage more upward mobility. >> the provisions that we studied reduce the incentive to provide more labor. that can reduce the incentive to work harder in those hours or other things that would advance one's earnings. >> is it fair to say the

structure of the law could reduce some incentives for upward mobility, people seeking to go up higher in the workforce, based on the structures of the subsidies? >> the particular provisions would reduce upward mobility in that way. we have not done that analysis. the provision of health insurance may also affect upward mobility. we have to analyze that. the particular provisions that reduce the amount of labor supply, this incentivize people to move up the ladder. i don't want to suggest we are joined that conclusion as a whole. >> i understand that. we don't know yet with the changing landscape when things

will be implemented. >> senator king. >> thank you. you are the indispensable man around here. your timing --remind me of the guy walking on the tight rope across the grand canyon. your providing a tremendous service to us. >> we will leave this hearing at time in terms lag of the interest rates and the effect on interest charges? everything was locked in at 10 years and two percent. an interest rate change next year will have no effect. to understandng what complements of the debt are locked in. what is short-term?

i am concerned about this increase and the impact on the budget. there is a time like here. -- lag here, isn't there? >> yes, there is. they are one percent higher throughout the decade. we have seen the phenomenon you're describing. the government will sell you debt next year -- that will in curse -- incur the high interest rate went away. some debt will not mature at all. be accurate to take 17 trillion and say that if interest rates go up -- >> that will not work with that will be published in this appendix. thumb takes account of that phenomenon. >> i want to follow up on that to get the data.

about thes talk affect of the affordable care act on people's employment decisions -- i believe that in the mostrun, probably lasting and important aspect of the affordable care act will be what we have talked about. eliminationvirtual or reduction of job loss. because, it is going to free people to start new businesses. that is where the dynamism comes in the country. i know people and i am sure everyone in this room knows evil who say i have a great idea, but i cannot leave my job because i have a sick child. a cannot lose my insurance. the idea that we are discouraging people from work, we are lowering people to follow the american principle of self-determination. i think that is a hidden benefit -- i'm not sure people

copulated. -- calculated. i believe that that is going to be very significant. the idea that somehow the affordable care act will take away the linkage between employment and health insurance is something we should discourage. we want everyone to work. security, whyal not everyone work until they are 100? that does not make sense to me. we want people working because they need to and they want to and they want provide for their families. they want to be creative about it. mypecific question to get to -- another question is, are tax expenditures expenditures just like head start or held grants -- pell grants. they are recorded different ways. >> they have very similar

effects to direct federal spending. they should be viewed similarly by both analyst -- i would commend my colleagues of good analysis of tax expenditures. really, there almost entitlements. if you are legally qualified to get them, and they are not examined very often, and they just go on forever. correct? >> that is right, senator. >> we're talking about how we pay for things. it is ok to pay for it by taking away some benefits that the disabled get. to say you cannot with at tax expenditures, it is a misunderstanding of the fact that the two are identical. >> we have issued a report last year that looks more in depth at tax and spend teachers. including the distribution and

economic affect. people who are interested in that topic -- we are happy to send you the report. i am guessing that they tend to go through more heavily to people with higher incomes. different expenditures are quite different. there are income tax credits. some are for the lower end. the state and local tends to be for the higher distribution. we will make sure you have that on your desk today. >> my final question is, not fixing infrastructure is death, is it not? >> it is a different sort of commitment. >> that has to be done eventually. >> we think will ultimately repair the bridge or expand the highway. we are not doing it now. we are putting it off. that puts a burden on the future. it is similar to the burden of doing something and borrowing to pay for it. >> i will take your answer as a

yes. that myld like to note colleagues are respect will. they taught me to be careful. >> i bet after last week, you understand that. thank you, sir. dr. elmendorf, thank you for your staff. and you and your personal responsiveness. and for being here today. i have so much i want to ask you about. just a little time. i want to focus on three things. one is the problem with the deficit. your new report emphasizes what we already knew. the second is growth. and then the impact of obamacare on growth. in terms of the

deficit, this was discouraging for me. it is getting worse. could you give me a quick answer? am i correct that revenues have averaged 618% of gdp? >> we have parameters for 40 years and we say it has been 17.5%. next decade, you said more than 18% per year. >> under current law, yes. >> conditions are that we need more revenue. we are continuing to grow. how about this cautionary spending -- discretionary spending? >> yes. >> what is left? that is what we appropriate every year. social security, health entitlements -- 99.7% of gdp.

15% in the next few years. that health entitlements will go up over 100% in the next 10 years. is that correct? >> we project that the rogue rims will rise to 6.1% in 2024. 115%.nominal terms, >> i take your word for it. >> this is the result of what? the borrowing is for the gap between spending and revenue. that isthe budget -- wrong most -- growing the most is social security. >> we're heading to record high revenues and low discretionary

spending. following other mandatory spending. we're talking about important programs that are unsustainable. health care entitlements, social security, the resulting net interest. >> there is a striking shift in spending. there are large programs that you highlighted, yes. >> how do you solve that? we need reforms. incredibly important programs. we have heard a lot about balanced solutions. make the next generation pay the cost for our were generation. as opposed reforming these programs. that is very clear in your report. this is a problem and we have got to address it. if we do not, we will face consequences. you talked about the possibility of a fiscal crisis. second, the economy. it is depressing, actually. not saying you are wrong. you're asking us to accept a new normal. not five percent growth,

it is two percent growth. you are saying that you have paired back your growth assumptions. they have been more optimistic than what has happened. i understand why you have done it. 1.4 trillion dollars less revenue in the next decade. this is not the first time it has happened. since president obama took office, he has come out with decreases in growth. those translate to this president jewel term -- presidential term. when you take those credentials -- this is all about the economy. you talk about the economic growth being key. economic growth through tax reform, does that make sense? >> that would be good for the economy. it depends on the specifics of the reform. >> would spend in trade be good? >> probably.

>> how about long-term debt reduction? >> that would be good for the economy. >> how about domestic energy production? >> i think that would as well. >> we have these things that you know would work. if we would just do them, we could both deal with the spending side of the growth side. on obamacare, you have looked at mulligan and others. people are leaving the workforce because of this sharp cliff. sideld say to my economist -- this is all about people starting new businesses and working in family businesses. if you're working, you're working. mostly demographics that are likely to drop out -- what do you know about them? >> the biggest effect is lowly -- on people with lower incomes. they're receiving subsidies. they withdrawal as the income rises. penaltyout 50% tax or

because of this cliff? tell us who these folks are? are they people who retire early or want to stay home with their kids? when i asked, it is because you look at the labor participation rate -- it is a record low for men right now. participationking rates even lower. that is bad for the economy and bad for growth and prosperity. when you look at this data that we know, the early indications are that this must be single men. they tend to be child us. that we are going to exacerbate this record level. what do you think? >> this affects a broad range of types of people. we did not do this analysis in a way that left us defective. >> could you look at the booking study on that and get back to me?

who do you think will be affected here? these are people that you want to get on that ladder of opportunity. moving up in the latter. this takes them off of the letter and reduces their benefits. they will be reduced. it takes them out of the possibility of being able to achieve their dreams. they lose the dignity and self-respect. that is my concern. i know that we disagree on some of the impacts. $1 trillion in new taxes does have an impact on workers. part-time at 30 hours does have an effect. this data is concerning. it exacerbates a problem that we have. you do not have to do it. we can solve these problems without that stiff cliff. that is one of the differences between the two sides. there are ways to do it. you would not have that 50% penalty.

you could still address many of the problems. i am over my time. thank you. >> thank you senator. thank you for your work in the work of your team and the very valuable report you have delivered. i'm struck by all of the questions from the committee. the one that sticks out is economic growth. we have talked about this grand canyon that's senator king suggested you are trying to navigate across the tight rope. the other side wants to focus on entitlement reform. we want to talk about expenditures. we think extending unemployment insurance will stimulate the economy and replace the regulatory burden. we seem to go back and forth with predictability. one thing that i wanted to ask for your input on was the one area that i hear general agreement between our parties. that is manufacturing. restoring robust economic growth strikes me as one of the best ways to achieve deficit reduction and to achieve return

to full employment and other shared objectives. about 25 of my colleagues and more than one dozen bipartisan bills. they would strengthen significantly the environment for manufacturing and the continued growth in the united states. manufacturing jobs are among the highest quality jobs and have the best multiplier effect. speak to broadly skills, access to credit, investment in r&d, export markets, infrastructure. could you comment on the importance of it as a sector to contributing to growth? what do you see as appropriate policy actions that we might take on a bipartisan basis? >> those are hard questions. i do not have adequate answers. you are correct that manufacturing jobs have tended in the past to provide higher than average wages and better than average benefits.

we have not done an analysis ourselves. am not aware of what policy actions might do for the many fracturing sector and how that might ripple through the economy. you ask questions and i wish i had answers. but i do not have them. >> i would be eager to work with you if i could at submitting for review and discussion a variety of prospective policy tools. they have been brought to me and to many of my colleagues and the manufacturing or. -- manufacturing sector. it is an area where government action can make a significant. let me turn to another topic. that is interest rates. the number have asked about those. of ourre roughly half current debt held by foreigners. they have difficulty discerning

the dnc of politics here in the capital. i would be interested in what you view as the short-term and long-term threats to our interest-rate and debt service costs. we have in recent year had far too many close calls. there was open discussion of the possibility of default. i think that that has increased the cost. there are long-term drivers that also create some question about the debt service cost that we may face going forward. if you would speak to the short-term and long-term drivers. >> we think that the default of the u.s. government would be dangerous. , untilmportant because now, investors have been able to count on the government paying its debt. if that were to change, you would have consequences that could be very severe. they are hard to quantify, given the lack of historical experience. interest rates can go up or down for a variety of reasons.

some would be good for the economy as a whole. they would make the interest grew larger. if we were stronger in economic growth, that could increase private credit and push up interest rates in a way that would make this committee not too happy about the economy. the economy is weaker in the next several years than we expect -- that could keep interest rates lower. there are economic effects. there is also a perceived risk of treasury securities and other investments. capital can come into the treasury department and leave other markets that seem more dangerous. there is a wide canopy of factors that affect interest rates. one might route for lower interest rates for the federal government, but that might come together with a weak economy. one does not want to think about high or low interest rates. that does not correlate with good or bad. we look at a variety of forces that can affect interest rates

and our projections can be balanced. risk to rates are a good deal higher or lower than we thought. >> to be clear, if i understood your testimony, the possibility of default -- urging default as a negotiating tool is a dangerous gamble. >> yes, senator. >> thank you. >> i want to thank all of our colleagues who participated. dr. elmendorf, i particularly want to thank you. this committee really does appreciate all the hard work that you and all of your staff put in to do our work. in cuba image for being here. as a reminder to our colleagues, if you have any statements or questions, they need to be submitted by 6:00 today. >> briefly, it looks like the budget will be late again. there are some reasons for that. the director called to discuss that. >> she has been very clear. a that result is causing us

problem. i will write you about, fundamentally, i the time she testified, we will still not have a complete budget. i think that would be better. if we could alter course to have a complete budget when she testifies, i think that would be essential. thank you. >> thank you. >> thank you very much. [captioning performed by the national captioning institute] [captions copyright national cable satellite corp. 2013]

>> on the next "washington kibbe will talk about his lawsuit against the obama administration for violating privacy rights. erez deputy director mirna p will discuss efforts to repeal laws that prohibit felons from voting after the release from prison. and later, the administration is considering using drone strikes against american citizens abroad who have ties to al qaeda. we will be joined by the american civil liberties union. is liveton journal" every morning at 7:00 eastern with your calls, tweets, and facebook comments. publican, we bring affairs events from washington directly to you.

putting you in the room at congressional hearings, white house event, briefings and conferences, and offering complete gavel-to-gavel coverage of the u.s. house. all is a public service of private industry. we are c-span, created by the cable tv industry 35 years ago and funded by your local cable or satellite provider. watch as in hd. like us on facebook. and follow us on twitter. >> earlier this week, the heritage foundation hosted a daylong conservative policy summit. mike lee spoke about changing economic -- education policy and the rising cost of higher education. he spoke for just over a half an hour. >> one of the reasons for this

is that the higher education system is controlled by something that our next speaker refers to as the iron triangle of regional organizations. the reason i am so excited, mike lee is a special person. he came here in the 2010 election. within months of him coming to washington, we were working with him on some of the heritage foundation's statements of the american dream lands. mike would come by and sit down with our policy experts. they would steep themselves in policy. i have not met anybody in washington who is more interested in ideas that mike lee. that is why it is such a privilege to work with him. one of the themes that you have heard me refer to throughout this event, from the morning straight through the afternoon, we cannot advance advert -- conservative policy until we take on the status quo. until we are able to trust old

ideas and inspire americans to change washington from the outside in. part of the reason that mike lee has been such a forceful advocate is that he also recognizes that he has not been afraid to take on the status quo. doing that, he yes come forth with innovative proposals. mike is here to talk about his higher education reform opportunities. it is something that would radically transform the way higher education works for the better and how people are empowered with choices that make more sense for themselves. i'm pleased to share the stage with senator mike lee. he will take questions afterwards. [applause] it is good to be with you today. on my way in, he said to me, are you all set to talk about railroad policy? of those brief moments of panic where i said maybe i got the wrong message.

then i realized it was just mike dean mike. it reminded me of a story from a former member of my staff. david barlow -- he was my chief counsel a couple of years ago. he has a son named william. he is sometimes restless during church. he is five years old. he was sitting there in church one day -- david said, william, you need to be good during church. if you have a hard time holding still, maybe you should stop and think about jesus. william would hear nothing of them. he said dad, to be perfectly clear, i am not thinking about jesus. i am thinking about trains. ok,w minutes later, he said hold still for a few more minutes, then this part of church will be over and you can go to sunday school and your friends. that will be fun. he said, to be clear, i will not be thinking about jesus during

sunday school, i will still be thinking about trains. on my way, as i was to deliver a speech on the senate floor about railroad policy, my wife sent me a text message saying i'm thinking about trains. before i begin my remarks, i want to thank here did action and all of the people at heritage that have made today possible. i think the conservative movement really is at its best when it is all about ideas. is something2014 that is likely to prove to be the beginning of a very important and new era for our country. an era in which americans are going to need conservatives to be at our best. what thees, that is heritage foundation has been all about. about making sure that

conservatives are at our best. as we begin the process of developing a new and long overdue conservative reform agenda, events like this are going to prove to be an invaluable and indispensable part of the development of that very agenda. that we so badly need. in 18 61, abraham lincoln told the united states congress that to him, these leading objects of government -- it was to elevate the condition of man to less artificial waste and to clear the paths of laudable pursuit for all. to put forth an unfettered start and a fair chance in the race of life. today, one of the great artificial weights on the shoulder of working families -- hard-working americans from one coast to the other -- one of the

great obstacles blocking their path of pursuit is the rising cost of higher education. along with the narrowed access to that kind of education. and the uncertain value that kind of education sometimes has attached to it. those problems are symptoms of the deep. ox that is at the heart of higher education policy in america today. policymakers that have is to overcome that paradox, i reconciling two ,eemingly conflicting contradictory, seemingly irreconcilable facts. on the one hand, the united date continues to transition him an industrial economy to in information-based economy. higher education is more important to social opportunity and economic mobility than it ever has been at any time in our

history. on the other hand, the standard credential of higher education in america is the bachelors degree grid it is being progressively and you are full and a batch list agree is becoming less viable at the same time? these are not the same thing. higher education and a bachelors degree are two distinct concepts. i believe that to succeed in the 21st century, the vast majority of americans will need at least some post secondary knowledge and skills. it is not necessarily any longer

the only way to get those things. part of the problem is vocabulary. until very recently, the college campus was the only game in town when it came to higher education. to make higher education cost effective, you need a centralized location where students from far away could be close to teachers, where scholars from different fields to be close together so they could have an opportunity to work with each other. could be in the immediate proximity of a common library that would be shared by the constituent parts of the university. possibley has made it for students to take classes from professors and other state. academics can conduct research with colleagues across oceans. people can carry a library

around in their backpack. students do not have to go to college to go to college. there are vocational programs and training programs in technological industries. there are punish ships -- apprenticeships in the skilled trades. there are portrait -- for-profit colleges. there is the thomas of distance learning options like online courses. this innovative alternative market is being cordoned off by increasinglyby an outdated federal policy governing the higher education and accreditation. assistance,ent primarily stafford loans and

pell grants, are offered through higherv of the federal protection act. students are eligible for title if they or grants attend a formally accredited school. there is a quality control argument for this kind of arrangement. that is not where the restrictions and the. they go much further than that. only the u.s. department of education can authorize accreditors under the system. congressght remember, effectively killed the private student loan industry in 2009. narrow america's

path into the middle class and into economic opportunity. the government today operates a kind of higher education cartel. operate as a gatekeeper to keep unwanted providers out of the market. this does not protect students from bad actors as much as it protects incumbent colleges from innovative competitors. protected andhas subsidized this market, it is starting to break down. the price of college has exploded. it is now impossible for all but the wealthiest students to pay their own way to an undergraduate higher education experience. a has madety of the b it impossible to have middle-class experience.

unintentionally, the current policies are creating three classes of students. first you have the affluent kids who attend the best high schools before college. they are all but certain to graduate from college and just have to decide which college to attend. next, you have high school graduates who could go to college but are reluctant to take on that much debt, the amount that will require them to incur. some of the might prefer to explore a more tailored or affordable option. people thatre the current policy all that locks higherthe current education financing system.

i school dropouts, students betrayed by the system who are socially promoted to graduation in high school without being prepared for college-level work, single parents whose life experience will prevent them from qualifying for federal assistance. 's offer to most -- tens ofs go 10 to thousands of dollars in debt for an overpriced degree to there's .o degree you will ever receive alternatively, you can spend the rest of your life locked out of the middle class. this is not a good choice. thatprogressives think increasing the level of taxpayer assistance to make up for any policy dysfunction. spendust say let us just

more money on the problem will go away. we have tried that. market,e in the housing what we have done is inflate the bubble. last summer, student debt past $1 trillion. it is now greater than credit card debt throughout the country. fundinger is not more for programs. i think the answer is to make more kinds of students and more kinds of educational experiences eligible for these kinds of programs. bill for reform would do. it would empower states to create alternatives and parallel accreditation systems to allow students to get title iv assistance in order to attend

alternative post secondary education providers. it is a visually voluntary from state to state. -- it would be voluntary from state to state. supplementgment and and not replace the current existing accreditation regime. college presidents can rest assured that if they like their regional a creditor, they can keep it. i am sincere in that. would be thatence state-based accreditation would not be limited to traditional degree issuing brick-and-mortar academic institutions. it would be available to students seeking specialized ,rograms, apprenticeships certifications, competency

tests, and individualized courses. limiting tobe no incumbent organizations. any applicants that met the state requirements could be empowered to accredit one of these programs. america's higher education market would be as diverse and nimble as the job creating industries that are looking to hire new workers. could haveusinesses programs to teach precisely the kinds of skills they need. imagine computer courses accredited by apple or google. have a chemistry program. boeing could have a aerospace engineering program. accrediting individual courses would give the student still

weighing their options to take a course or two without going thousands of dollars into debt. who needed employees to take a few classes to qualify for a promotion could find a program that matches their individualized needs. accrediting company exams could have students acquire skills on their own timelines, in this respect they would be freed from the arbitrary semester calendar which is kind of irrelevant and a relic of a bygone era. brick-and-mortar institutions would be free to hold onto that. students are sometimes left in a

state of unpreparedness. they could get assistance for remedial classes or getting professional skills. parents pulling double shifts could be available for title iv funds to build a transcript at a personalized rate and a sustainable pace. labor unions and companies employing skilled workers could hipredit apprentices programs. that is another exciting feature of this plan. it opens doors for more students and for more teachers for more types of students and more types of teachers. talented faculty who might be uninterested in esoteric publish or perish types of research often required for tenure at more traditional institutions could focus their energy on classroom excellence and it being better teachers.

groups of professors could strike out on their own forming new business of models like medical practices. they can offer high-quality education for a fraction of the cost at a traditional university. have a level playing field for new innovators . they could see where empowered students and teachers can take that kind of technology. turn highers could education into a cutting-edge growth in history -- industry. associations of civil society could play a crucial role in this kind of system as well. nonprofit groups like the u.s. historical society or the seer club or the mayo clinic -- the sierra club or the mayo clinic could provide competency exams.

think of the opportunities that could come of this. faith organizations could give local students accredited college courses. they could do so for next to nothing and they could do so as part of their mission for those that they represent and those they are dedicated to serving. they could make teaching higher education their form of tithing or community volunteering. the retired mechanic who lives down the street and the stay-at-home mom with a masters degree and the civil war reenacting enthusiasts who has an encyclopedic knowledge of american history are all potential teachers that current policy tends to keep on the sidelines. alternative accreditation could start to get those kinds of people into the game and more americans into the middle class,

which is what we want. oner all, how long does have to wait for heritage university? i would like to see that someday. [laughter] we know that people other than tenured academics can teach college-level material. adjunct professors and teaching assistants do it every day. some the best courses i took in college and law school were from adjunct professors. window credentials other than the traditional degrees offered by higher institutions can be made to work in fields that use them. accountants take the cpa exam. stockbrokers take the series seven. skilled tradesmen have their

various journeyman exams, justin matthew. -- just to name a few. certifications have been in the marketplace where they have been flourishing and widely accepted for many, many years. the market is moving in this direction already. it is time for federal policy to catch up to the marketplace. there are too many valuable opportunities and invaluable people that current policy tends to exclude. it is time to decouple title iv eligibility. my bill would begin that process. it spurs innovation and experimentation. it creates jobs. the educationup market for new ideas and drive down costs. some reformers might want to go

even further and open the market with a national system based in washington. it would blow up the existing system altogether. alternative has three goals. would protect from cronyism that inevitably targets centralize power. it is harder for special 50 statesto get to instead of one bureaucracy in one city. it allows federalism to work its magic, just as the founding fathers intended. state to be able to check each other's imprudence. voters would have a say in this process.

education reform and innovation would be an important issue in state legislative campaigns. it will preserve and reward what does work in today's colleges and universities. america's higher education system is not failing. day beyond anyry reasonable expectation of the people who created it many generations ago. our best colleges remain the best colleges anywhere in the world. students from around the world come here to the united states to study. federal higher education policy is failing the two thirds of americans who never get a ba. the large majority of americans will never set foot on a college campus. are unaffordable.

the timelines are not accommodating. student's income, the greater the need. in today's more customizable world, students should be able to build their transcripts a la carte. they should combine traditional semester courses. our highered to dump education system. we need to open up to more students. to moreto open up teachers. a little competition would be good for everyone. the goal of reform should be to build up and not tear down. ouread of eliminating current accreditation regime, my bill would simply allow 50 new ones to compete with it.

they would compete with each other. controluld be quality to protect students and taxpayers. education, the greatest threats to equal are artificial weights and obstacles. are the unintended consequences of dysfunctional government policies. the current system has left a lot of people behind. it has helped a lot of people. reform needs to circle back and make equal opportunity a reality for everyone. it is not just there for the lucky ones. the point of higher education should be to enable good teachers to teach and willing students to learn. the economy should grow and civil side he should flourish.

it should look at for those of students at the current system is leaving behind. the american people are ready to meet that challenge. will starton reform to give them that very chance, the chance they need to succeed. thank you very much. [applause] the senator will take questions. -- have gotten praise from praise from the think back -- a think tank world. what have you gotten from state governments? >> for those who are firmly with this proposal, the praise has been pretty consistent. the only significant concern that i have heard have been from people in the more traditional institutions. they have been misinformed about what it would do. i have had some college

administrators who understandably thought this would tear down the existing system. they wanted to warn me that would not be a good idea. the response has been overwhelmingly positive. how -- when i was growing up the terms were meant for an internship. these are just new ways of describing it. are you addressing the thesis that are active on campus? onet a girl from china campus. she needed a social security card to get paid at her internship. these are jobs it should go to americans. she takes the social security

hard when she leaves. she is eligible to get credit cards. are you addressing that? this bill does not deal with any immigration issues. it does not reform the visa system. that is the focus of this bill. >> we just introduced this in the last few weeks. he had a handful of cosponsors. it is still novel and people are getting their arms around. not under the mistaken impression that this is going to pass within a matter of days or weeks. this is going to take some time.

the good news is that those who have reviewed it have been very encouraging and i am optimistic. >> there is a reauthorization coming up. how will that impact the dialogue? whyhat is the many reasons the senate needs to restore the regular order of amendment process. when we are dealing with some kind of reauthorization of an , we need togram consider options along with it. things like this have a much higher likelihood of getting to a vote and being debated and considered. up in connection

with the vote, it is more likely to occur we have an open amendment process. things have been functioning lately like an impossibility. from july of last year through the end of january, we had a total of four roll call votes in the senate. measurese on introduced by republicans. has beenity leader filling the amendment tree and blocks all amendments other than those that he blesses. him to trying with to break that logjam. we think that is wrong. this is not a republican or democrat issue. this is simply an american issue. it is an issue of public policy.

the american people send us to take votes. he would need, more flexibility with the bill. there is an index trying to come up with a new gauge of college students saying degrees are not equated to being prepared in the workforce. i was wondering if there is any conversation about that. >> i have heard of that. oft we are doing arises out a similar pattern of thinking. i have not met with him yet. i hope to in the near future. i think there is a lot i can learn from them. >> we have time for one more.

that this is a great first step. what do you think other opportunities are for reform? what do you see as other opportunities? and the buyer notifications, the product, this is how much this fridge rater will cost to operate. you know that when you buy a refrigerator. the miles per gallon rating that a car receives before you buy the car. a lot of people have suggested that we require similar information to be disclosed when it comes to higher education.

this is especially true where federal funds are concerned. there should be metrics reduced and made available to the consumer about what the graduation rates are and the employment rates are posted graduation. they need to know what the salary ranges are within college majors. >> thank you very much. [applause] today on c-span, your calls on washington journal. then janet yellen testifies about monetary policy at her first hearing since becoming the federal reserve chair. here they are coming in the closing in on me. . am still thinking

why winter survival school, they taught us that the people who capture you are the least trained. your best time to escape his then. i thought they were rookies. i had two rounds. i said a getaway and get back. i fired around over their heads. they did not flinch. status raised their rifles. -- they just raised their rifles. he had drawings on one side and vietnamese fanatics on the other. the drawings showed them capturing an american pilot. , hands up.y said

nine gunsfacing about staring at me. that is the best i was going to get that day. pilot,rmer air force tonight on c-span's q&a. the headlines of today and phone calls. will talk about the against theiled obama administration. later, the obama administration is considering using drone strikes against american citizens abroad who have ties to al qaeda.

washington journal is next. ♪ good morning. the president, in california today. he returns to the white house tomorrow night it will be talking about jobs and the economy and tuesday. then he is off to a summit with the canadian prime minister and mexican president. governors are in town for the winter meeting. for the is out presidents' day holiday. we are going to begin with a new initiative on climate issues as outlined by the president last friday.